Focused on every journey Annual Report and Accounts for the year ended 2 July 2016 Contents About us Strategic report Go-Ahead is one of the UK’s leading public 2 Go-Ahead at a glance 4 Group Q&A transport providers enabling more than a billion 8 Chairman’s statement 10 Group Chief Executive’s review and Q&A journeys each year on our bus and rail services. 16 Our business model 18 Our core business units At Go-Ahead we place great importance on 20 Our markets partnership, adopting a collaborative approach 23 Our strategy and key performance indicators 40 Managing risk with governments, local communities and 46 Finance review 50 Business review strategic partners; developing and operating Governance services that create long term value for all of us. 58 Introduction to corporate governance 60 Board of directors 62 Corporate governance report 71 Audit committee report Our leadership team 80 Nomination committee report 84 Directors’ remuneration report 104 Directors’ report 107 Directors’ statement of responsibility Financial statements 108 Independent auditor’s report to the members of The Go-Ahead Group plc 112 Consolidated income statement 114 Consolidated statement of Chairman’s statement Group Chief Executive’s review Finance review comprehensive income 115 Consolidated statement of changes in equity See more on page 8 See more on page 10 See more on page 46 116 Consolidated balance sheet 118 Consolidated cashflow statement Our integrated approach 120 Critical accounting judgements 121 Notes to the consolidated Sustainability and corporate responsibility are integral to our strategy and the way we operate at every financial statements level of the business. This is our fourth integrated annual report which aims to present a comprehensive 159 Company statement of comprehensive view of the Group. income Our strategic priorities 160 Company statement of changes in equity 161 Company balance sheet 162 Directors’ responsibilities in relation to the Company financial statements Society Customers Our people Finance 163 Notes to the Company financial statements To run our companies To provide high To be a leading To run our business Shareholder information in a safe, socially and quality, locally employer in the with strong financial environmentally focused passenger transport sector. discipline to 173 Shareholder information, financial calendar responsible manner. transport services. deliver sustainable 176 Corporate information shareholder value. See more from page 23 onwards Our Board Governance Our financial results Our Board has a wide range of We are committed to a robust We are committed to skills and responsibilities. governance framework. transparent and clear reporting. See more from page 60 See more from page 58 See more from page 112 onwards onwards onwards Go-Ahead online For more information about The Go-Ahead Group and our operating companies, visit: www.go-ahead.com Follow us on: Linkedin.com/company/The-Go-Ahead-Group-PLC Twitter.com/TheGoAheadGroup Creating long term value for Strategic report all stakeholders Governance Financial statements Shareholder information Our strategic report for the year ended 2 July 2016, as set out on pages 2 to 57, and the directors’ report, on pages 104 to 107, have been reviewed and approved by the Board of directors. Andrew Allner, Chairman 8 September 2016 The Go-Ahead Group plc I www.go-ahead.com 1 Our performance at a glance Go-Ahead at a glance It has been a year of financial progress in all three divisions. Our market positions have been strengthened, with organic growth supported by contract wins and extensions. As part of a targeted programme, we are pleased to have won new business in Singapore and Germany. We continue to explore similar opportunities in these and other selected markets. Review of the year Financial highlights Sustainability highlights • Overall results slightly ahead of management expectations • 95% sustainability rating assigned by Business in the Community • Achieved £100m bus target; adjusted operating profit* up • Highest Carbon Disclosure Project score amongst our peers 8.0% to £100.4m • First FTSE 350 company to achieve the Fair Tax Mark for • Regional bus adjusted operating profit* up 9.4% to £53.3m. responsible tax practice Passenger growth in the second half of the year • First transport Group to achieve the Carbon Trust triple accreditation • London bus adjusted operating profit* up 6.3% to £47.1m despite for carbon, water and waste a significant reduction in QICs income • Rail adjusted operating profit* at £57.0m with a margin of 2.3%. Contribution to the DfT in the year of £222.4m Economic contribution • Statutory operating profit in bus and rail was £91.2m (2015: £80.7m) Total revenue £3,361.3m and £26.2m (2015: £16.1m) respectively • Strong cashflow and robust balance sheet Payments to suppliers £1,697.4m • Proposed full year dividend increased by 6.5% or 5.85p to 95.85p Staff costs inclusive of PAYE £1,123.3m National Insurance costs £92.2m Strategic and operational progress Net rail contributions to DfT £222.4m • Difficult year in GTR – working closely with the DfT and Network Rail Dividends paid to shareholders £39.4m to improve services to customers Capital expenditure £113.9m • Sector-leading customer satisfaction score of 89% in regional Corporation tax payments to government £24.8m bus operations Finance costs £17.6m £30.3m • Record passenger numbers in rail division Retained in equity • Shortlisted to bid for the West Midlands franchise • Retained high levels of customer satisfaction at London Midland of 86% • Entry into new overseas markets with contract wins in the Singaporean Total shareholder return (rebased to 100) bus market and German rail market • Adopted the voluntary ‘Living Wage’ across the Group, ensuring all The Go-Ahead Group plc FTSE 250 Index Peer group (average return) employees, regardless of age, earn at least £8.25 per hour exceeding 300 the ‘National Living Wage’ requirements 250 * Adjusted results exclude amortisation, goodwill impairment, exceptional operating costs, and the incremental impact of IAS 19 (revised) as shown on page 46. 200 Directors’ remuneration 150 We report a single remuneration figure for executive directors which 100 includes salary, annual performance-related bonus, long term incentive bonus and other benefits. A substantial part of executive directors’ remuneration is 50 performance-related and linked to key performance indicators. 09 10 11 12 13 14 15 16 Our directors’ remuneration report can be found on page 84 2 The Go-Ahead Group plc I Annual Report and Accounts 2016 Group key facts Total revenue (£m) Total adjusted operating profit (£m) Adjusted EPS and the impact £3,361.3m +4.5% £157.4m +16.9% of IAS 19 (revised) Strategic report 220.5p +21.3% Impact of IAS 19 (revised) Impact of IAS 19 (revised) Operating profit (before amortisation, goodwill Adjusted EPS including impact impairment and exceptional operating costs) of IAS 19 (revised) Regional bus London bus Rail Statutory operating profit Basic EPS 4,000 2,423.8 2,571.8 2,702.4 3,215.2 3,361.3 200 110.2 102.5 118.8 134.7 157.4 250 141.9 139.6 172.6 181.8 220.5 3,500 2,498.0 53.3 2,397.4 200 Governance 3,000 37.0 150 31.0 1,901.9 24.0 1,810.3 20.0 164.0 167.2 2,500 1,732.5 150.8 162.3 15.6 120.4117.4 150 18.1 148.6 14.6 109.5 114.7 22.0 2,000 15.8 103.2 123.8129.5 125.3 100 95.6100.5 96.8 117.6 121.6 86.7 1,500 80.2 100 1,000 457.9 487.6 50 378.4 423.9 449.7 50 500 312.9 337.6 350.8 359.9 375.7 Financial statements 12 13 14 15 16 12 13 14 15 16 12 13 14 15 16 Group revenue rose £146.1m, or 4.5%, in Adjusted operating profit increased by £22.7m, Adjusted earnings per share (EPS) rose by 38.7p, the year, with growth in both bus and rail. or 16.9%, ahead of the Board’s expectations. or 21.3%, reflecting increasing operating profit Adjusted operating profit excludes the and taking the non-controlling interest in our rail incremental impact of IAS 19 (revised), division into account. Adjusted earnings per amortisation and goodwill impairment. share excludes the incremental impact of IAS 19 (revised), amortisation and goodwill impairment. Shareholder information Dividend paid and proposed Carbon emissions per Customer satisfaction (%) per share (p) passenger journey (kg) Regional bus 89% -1ppt 95.85p +6.5% 0.82kg -2.34% Rail 75% -1ppt Regional bus Rail 100 100 95.85 1.0 0.97 92 90.0 90 90 90 89 84.5 0.85 0.84 83 80 81.0 81.0 0.8 0.83 0.82 0.82 80 78 77 76 75 60 0.6 60 40 0.4 40 20 0.2 20 12 13 14 15 16 08 12 13 14 15 16 12 13 14 15 16 In line with our progressive dividend policy and The year on year rate in this metric has improved Our regional bus passenger satisfaction scores the interim dividend, a final dividend of 67.52p by 2.34% and we continue to make progress remain industry leading. The overall score in has been proposed. This would provide a total for towards our 10% reduction target by 2018 our rail division was impacted by the significant the year of 95.85p. on a 2014/15 baseline. We have already made infrastructure improvement works taking significant improvements in this area and carbon place as part of the government’s £6.5bn emissions per passenger journey have reduced Thameslink Programme.